ESOA

Business Context and Reporting Period

Company: Energy Services Acquisition Corp. (a Delaware corporation and "blank check" company).

Reporting Period: Quarterly report (Form 10-Q) for the period ended March 31, 2007.

Business Status: The Company is in the development stage with no active operating business. Its sole objective is to consummate a business combination (merger or acquisition) with an operating entity. Activities since its IPO in September 2006 have been limited to identifying and analyzing potential acquisition targets. The Company has 18 months from its IPO date (September 6, 2006) to complete a business combination or face mandatory liquidation.

Key Financial Metrics

Note: The Trust Account balance includes $49,600,722 in cash equivalents and $1,032,000 held from the Underwriter.

Material Changes vs. Prior Period

• Profitability: The Company reported a net income of $368,480 for the quarter, driven entirely by interest income ($641,784) earned on funds held in the Trust Account. This contrasts with operating losses of $86,204 for the quarter.
• Trust Account Growth: The Trust Account balance increased from $49,149,173 at September 30, 2006, to $49,600,722 at March 31, 2007, due to accrued interest and dividends.
• Liabilities: Total liabilities decreased from $1,447,540 to $1,306,006, primarily due to a reduction in accrued offering costs from $178,015 to $45,687.
• Operating Expenses: Formation and operating costs for the quarter were $74,999, compared to $123,569 for the six-month period, indicating a relatively steady burn rate for administrative and due diligence activities.

Guidance, Outlook, and Risks

• Outlook: Management intends to use substantially all net proceeds from the IPO to acquire a target business. The Company anticipates approximately $350,000 in expenses for legal, accounting, and due diligence over the next two years, plus $120,000 in office expense reimbursements.
• Liquidity: Working capital is generated solely from interest earned on the Trust Account. The Company is limited to using up to $1,200,000 of such interest (net of taxes) for working capital. Management believes current interest earnings are sufficient to fund operations without raising additional funds, though additional financing may be required to consummate a business combination.
• Risks:
  • Liquidation Risk: If a business combination is not consummated within 18 months (or 24 months with extensions), the Company must liquidate. In such an event, the per-share value distributed to shareholders may be less than the IPO price.
  • Third-Party Claims: Funds in the Trust Account may not be protected from third-party claims against the Company if vendors or target businesses do not execute waiver agreements.
  • Warrant Expiration: Warrants may expire unexercised if the Company cannot deliver registered shares of common stock.
• Unusual Items: The Company issued an underwriter option to purchase up to 450,000 units, valued at approximately $1.64 million, which was recorded as an expense of the public offering charged directly to stockholders' equity.

Investor Verification Checklist

• Trust Account Status: Verify the current balance of the Trust Account ($50.6M) and confirm that interest earnings are being properly segregated and utilized only for permitted working capital expenses.
• Acquisition Timeline: Confirm the remaining time available to consummate a business combination before the mandatory liquidation deadline (18 months from September 6, 2006).
• Redemption Rights: Review the specific terms under which public stockholders can redeem their shares for a pro-rata share of the Trust Fund if they vote against a proposed business combination.
• Related Party Transactions: Verify the $150,000 note payable to the Chairman/CEO and the $5,000/month office expense reimbursement agreement with an affiliate.
• Warrant Terms: Confirm the exercise price ($5.00) and expiration dates of the warrants issued in the IPO and private placement, and the conditions under which the Company can redeem them.